EU member states to receive new weapon against VAT fraud

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Member states of the European Union suddenly affected by large-scale VAT fraud expect to be in a position to take action against missing trader intra-community fraud within a month with the so-called reverse-charge provision. If this regulation were used as an emergency measure, VAT would no longer be due from the supplier but payable by the buyer. This fast response mechanism is intended to become part of the new VAT strategy as proposed by the EU Commission on 31 May 2012.

Currently the approval process takes months before an affected member state is permitted to resort to a control measure that is not intended in the VAT regulations. This gives fraudsters a head start, allowing them to siphon several billions of Euros from the EU and national budgets annually. According to the EU Commission, losses of around five billion Euros were incurred between June 2008 and December 2009 due to VAT fraud in the field of emissions trading alone.

EU Tax Commissioner Algirdas Šemeta explained: "When it comes to VAT fraud, 'time is money'. The fast response mechanism establishes a hold in the VAT system in order to fight VAT fraud effectively. This mechanism will help protect urgently needed public revenues while creating fair and equal competitive conditions for honest companies."

But in a statement dated 6 December 2012, the EU Commission clarified that a reform of the VAT system is not intended to effect fundamental change. The assessment of VAT normally remains in the destination country, i.e. still the country where the customer resides.

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